Opinion
DOCKET NO. A-5275-12T2
06-09-2015
TODD R. LEATHERMAN, Appellant, v. BOARD OF REVIEW, DEPARTMENT OF LABOR and SEAPORT BUILDERS, LLC, Respondents.
Henbest Law Group, L.L.C., attorneys for appellant (Jason C. Henbest, of counsel and on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Anthony DiLello, Deputy Attorney General, on the brief). Respondent Seaport Builders, LLC, has not filed a brief.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Fuentes and Ashrafi. On appeal from the Board of Review, Department of Labor, Docket No. 373,002. Henbest Law Group, L.L.C., attorneys for appellant (Jason C. Henbest, of counsel and on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Anthony DiLello, Deputy Attorney General, on the brief). Respondent Seaport Builders, LLC, has not filed a brief. PER CURIAM
Claimant Todd Leatherman appeals from a final decision of the Board of Review (the Board) of the Department of Labor and Workforce Development (the Department) denying his claim for unemployment compensation benefits and requiring that he refund payments he previously received. We affirm.
Leatherman was employed by Seaport Builders, LLC, a construction company whose sole registered owner and member was Leatherman's wife. He described his job as "foreman, carpenter, estimator . . . a multi-tasked job . . . ." Unemployment insurance taxes were deducted from Leatherman's paychecks.
On September 19, 2010, Leatherman filed for unemployment benefits. In April 2011, Leatherman and his wife separated, and they were divorced in June 2012. Leatherman received unemployment benefits until he started a new construction business and began working again.
In January 2012, a Deputy Director of the Division of Unemployment Insurance (the Division) determined that Leatherman had been ineligible to receive benefits because his employer was effectively his wife. Leatherman appealed that ruling administratively. Following a telephone hearing on February 5, 2013, the Appeal Tribunal upheld the Deputy Director's decision, and Leatherman was directed to refund $16,200. On further administrative appeal, the Board ultimately upheld the decision of the Appeal Tribunal on March 17, 2014.
Leatherman argues that denial of unemployment benefits to him is contrary to our holding in Palitto v. Board of Review, Department of Labor, 312 N.J. Super. 157 (App. Div. 1998), because unemployment taxes were deducted from his paychecks while he was employed.
Our standard of review is limited. Pub. Serv. Elec. & Gas Co. v. N.J. Dep't of Envtl. Prot., 101 N.J. 95, 103 (1985). We will reverse a decision of an administrative agency only if it is contrary to law or arbitrary, capricious, or unreasonable. Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). "[I]f substantial credible evidence supports an agency's conclusion, a court may not substitute its own judgment for the agency's even though the court might have reached a different result." Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992); see also Mullarney v. Bd. of Review, 343 N.J. Super. 401, 406 (App. Div. 2001) (scope of appellate review in appeal from denial of unemployment benefits).
Under N.J.S.A. 43:21-19(i)(7)(C), which is a definitional provision of the Unemployment Compensation Law, N.J.S.A. 43:21-1 to -24.30, the term "employment" does not include "service performed by an individual in the employ of his . . . spouse . . . ." Also, N.J.A.C. 12:16-11.2(c) provides: "An LLC consisting of one member shall be classified as a sole proprietorship unless the LLC elected a corporate classification for Federal income tax purposes by completing IRS Form 8832 . . . ." Leatherman has no evidence that such an IRS filing was completed by Seaport Builders, LLC. Therefore, Leatherman is considered to have been employed by his wife, and his "employment" would not ordinarily come within the meaning of that term for purposes of the unemployment compensation law.
However, in accordance with N.J.S.A. 43:21-8(c)(2) and N.J.A.C. 12:16-14.1, an employer that is not otherwise subject to the unemployment compensation law can elect in writing to be subject to that law. In Palitto, supra, 312 N.J. Super. at 161, we held that payment of unemployment taxes by the employer was substantial compliance with the requirement that the employer make such an election.
In direct response to our decision in Palitto, the Department amended N.J.A.C. 12:16-14.1 to exclude payment of unemployment tax contributions as a recognized election by the employer. Since 2000, the regulation has stated in full:
(a) An employing unit desiring to elect to become subject to the Unemployment Compensation and Temporary Disability Benefits Laws may request from the Controller or his or her designee forms for voluntary election to become an employer, or
to extend its coverage to individuals performing services which do not constitute employment.
(b) The forms for voluntary election to become an employer under the Unemployment Compensation and Temporary Disability Benefits Laws or to extend coverage shall be prescribed by the Controller or his or her designee. Election of coverage shall be made in writing, on the forms and in the manner prescribed by the Controller or his or her designee. The payment of contributions does not constitute an application for the election of coverage for otherwise exempt services. Any payment of contributions for an otherwise exempt individual shall be reimbursed to the employer for a period of up to not more than two years from the date of payment.
(c) The employing unit making application for voluntary election of subject status must, at the time of making such application, be exempt and have at least one individual, not a member of his or her immediate family, in employment who would be affected by the voluntary election.
[(Emphasis added to designate the 2000 amendment.)]
Thus to be eligible for unemployment benefits, Leatherman would have to show that Seaport Builders, LLC, made an election in writing to be covered by the unemployment compensation law and that it employed at least one person who was not an immediate member of his wife's family. Leatherman has no evidence that Seaport Builders, LLC, made a written election, and we do not know whether it employed anyone but him.
Leatherman argues that the amended regulation is contrary to the holding of Palitto and should not be enforced. We disagree. Our decision in Palitto was an interpretation of the statute and regulation as they existed at the time. It did not restrict the Department from amending the regulation to clarify that contributions alone do not constitute a valid election by an employer. Furthermore, our concern about unjust enrichment of the Division is moderated by the regulatory provision for refund of unemployment taxes paid without a valid election.
In deference to the specialized expertise and superior knowledge that administrative agencies have in the areas of law delegated to them by the Legislature, courts grant a presumption of validity to regulations adopted by an administrative agency. N.J. Soc'y for the Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 385 (2008). Leatherman has not shown that the regulation that precluded his receiving unemployment benefits is arbitrary, capricious, or unreasonable. See N.J. Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535, 548-49 (2012). In the absence of evidence that Seaport Builders, LLC, made a written election to be covered by the unemployment compensation law, Leatherman was not entitled to receive benefits.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION